How Immigrants Can Build Credit Without Accumulating Debt

Building credit is the all-important first step to qualifying for financing options such as auto loans and mortgages. But for some immigrants, the concept of credit is synonymous with debt, says Silvana Delgado, an advisor at the Hispanic Center for Financial Excellence.

We asked Delgado to talk about this and other misconceptions immigrants might have about credit and debt, and to offer solutions to some of the obstacles they might face when establishing financial profiles.

What challenges might immigrants face when it comes to building credit and avoiding debt?

Many immigrants come from countries where taking on debt is viewed as a last resort after asking family and friends for money. Banks tend to lend low amounts and charge high interest rates. As a result, people try to avoid relying on credit. They buy goods or services with their savings, or they simply don’t make the purchase.

Because the American credit system is new and unfamiliar to them, immigrants are prone to making uninformed decisions that they may regret down the road. One example: financing vehicles through loan programs that don’t require a credit check. Although it may seem like a good deal at first, borrowers end up being stuck with outrageously high interest rates with lenders that don’t even report to the credit bureaus, which means they don’t help build credit.